Ensuring a Timely Economic Stimulus: The Benchmark of CDBG Expenditures

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Enacted in 1974, CDBG is one of HUD’s oldest, continually running program. CDBG funds are provided by formula to nearly 1,200 state and local units of government (plus, of course, the obligatory additional CDBG funds awarded as Congressional earmarks).  Typically, between 10 and 12 percent of CDBG funds are used for “public services”, which is the part of CDBG that most municipalities use to fund a variety of local nonprofit human and social services.  The following shows the some of the kinds of services that have been funded through CDBG from FY2001 through FY2008:

Total CDBG Public Services funding:  $4.101 billion, including $335.2 million in senior services funding, $81.0 million in services for the disabled, $34.2 million in legal services, $588.2 for youth services, $101.3 million for battered/abused spouse services, $215.2 million for employment training, $276.1 million for child care services, $35.8 million for landlord/tenant counseling, $178.2 million in health services, and much more.

Aside from these public service expenditures, of course CDBG supports community development activities in which many nonprofits participate.  $9.387 billion has gone for housing activities such as new construction and rehab of single family and multi-family affordable housing, lead-based paint testing and abatement, and operating and repair of foreclosed properties.  An additional $3.33 billion has gone for CDBG-funded economic development projects, including $224.7 million for micro-enterprise development.

All told, CDBG is a potpourri of program activities that affect a wide range of nonprofits.  But many communities have been notoriously slow in getting their CDBG dollars deployed and spent.  The standard measure for an entitlement community having problems with CDBG is when it has more than 1.5 times its current year CDBG allocation still unspent.  The number of such communities has declined over the years due to HUD staff paying more attention, per Congressional mandate, to ensuring timely expenditures.  According to the latest numbers we’ve seen, the number of communities above 1.5 is down from over 300 to around 40 (according to the Bush Administration’s FY2009 CDBG budget proposal justifications).

Nonetheless, the existence of 40 or more entitlement communities with more than 1.5 times their CDBG allotments backlogged suggests that there are many more of the over 1,000 CDBG entitlement communities with 1.0 or more CDBG allocations languishing.  Nationally, for 2006, the national average for unspent CDBG funds was 1.42, somewhat indicative of the fact that many recipients were fundamentally aiming to get below the 1.5 timeliness threshhold (warranting increased HUD oversight if they didn’t).  In the past, the bulk of all backlogged CDBG funds were concentrated in some 20 entitlement cities characterized by consistently tough community conditions where the money was desperately needed. For example, for the period of July1, 2005 through June 30, 2006, the City of Philadelphia was slated to get $59.7 million in CDBG while it had over $90.7 million in unspent CDBG funds from previous years.  Cambridge, Massachusetts, on the other hand, for the 2006-2007 period, had $2.0 million in unspent CDBG as it awaited its entitlement grant of $3.3 million.  To its credit, Lowell, Massachusetts, a city challenged by a very difficult economy, expected a $2.4 million entitlement grant in 2006-2007 while sitting with only $1.8 million unspent from previous years.

Be assured that the critics of the economic stimulus will point to funding clogged in local, state, and federal agencies as evidence that government programs don’t work, that the stimulus was simply a plan to “throw money at problems”, and the like.  It is up to everyone–government agencies and nonprofit “subrecipients”–to get funds deployed to help people in need at this time in our nation’s economic crisis.

The ability of state and municipal “CDBG entitlement” recipients to get these funds into the hands of nonprofit and for-profit developers in a timely fashion is an important indicator of how quickly nonprofits will be receiving funds through the economic stimulus program–and an object lesson in what nonprofits will have to do to come to the table to make sure that the funds do get deployed as they should be to address the nation’s continuing economic decline.